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March 13, 2013

Advisor Accidentally Mails List of Tax Cheats, Authorities Zone In

Names, other incriminating data included; one client was a Nazi-era exile

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Whistleblowers
A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.

RIAs and Customer Identification
Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.

A word of advice—if you plan to help clients hide assets from the IRS, don’t inadvertently mail an incriminating list of names and account numbers that somehow ends up in the hands of regulators.

Federal prosecutors charge that over an 11-year period, Singenberger helped 60 people in the U.S. hide $184 million in secret offshore accounts, according to Bloomberg. He attached colorful names like Real Cool Investments Ltd. and Wanderlust Foundation.

Then, according to the news service, Singenberger inadvertently mailed a list of his U.S. clients, including their names and other details, which eventually wound up with federal authorities.

Bloomberg says U.S. authorities appear to be picking off the clients on that list one by one. Among those affected: Jacques Wajsfelner, an 83-year-old exile from Nazi Germany, and Michael Canale, a retired U.S. Army surgeon. Another customer, cancer researcher Michael Reiss, pleaded guilty, though his court records don’t mention the list.

“He was sending mail to someone in the United States, and apparently in error he included a list of U.S. taxpayers,” Assistant U.S. Attorney Dan Levy said on March 5 at Wajsfelner's sentencing in New York. “The government has mined that list to great effect and prosecuted a number of people who were on that list.”

Wajsfelner, who pleaded guilty to hiding $5.7 million from the Internal Revenue Service, was sentenced to three months of house arrest.

The case comes as negotiations continue between Swiss banks and U.S. authorities over the latter’s access to once secretive accounts. Long a haven for ultrawealthy individuals and families, the United States has increased pressure in recent years to open accounts of suspected tax cheats.